Despite a recent declaration by Bank of Montreal Chief Economist Douglas Porter that Toronto’s red-hot housing market is indeed in a “bubble,” other economists have been hesitant to use the controversial label to describe the city’s current real estate boom.
One of those experts, Dana Senagama, a principal market analyst for the Canadian Mortgage and Housing Corporation (CMHC), says “it implies that there are no fundamentals to support it and that’s not the case here in the Toronto housing market.”
Senagama cited the city’s strong employment rates, slow inflation and historically low mortgage rates as evidence of Toronto’s vibrant economy. However, Senagama does recognize that there are some valid concerns about the housing situation.
The market analyst referred to overvaluation, price overheating and price acceleration in the housing market as “problematic conditions” to keep an eye on.
“Whatever decision you make, whether you’re a home buyer or a seller, base your decisions wisely on the information we (the CMHC) provide,” Senagama told CTV News Channel on Thursday.
On the foreign buyers’ tax:
As the average price of a home in Toronto continues to rise and Vancouver’s market continues to cool, the Ontario government is being urged by at least one Toronto city councillor to establish a tax on foreign investment similar to the one introduced in British Columbia last August.
In addition, Toronto Mayor John Tory told reporters at City Hall on Thursday that he was weighing the possibility of a new tax on owners of the estimated 65,000 vacant homes in the city that would be similar to Vancouver’s tax and would be in Toronto’s “legislative domain.”
The average price of a home in Toronto jumped 27.8 per cent year over year from $685,278 last year to $875,983 according to the Canadian Real Estate Association. By comparison, Vancouver saw a drop of 9.8 per cent year over year, with the average price of a home falling from $1,104,133 last year to $995,583.
Ontario Finance Minister Charles Sousa has promised to consider the possibility of a foreign buyers’ tax for the Toronto-area in the upcoming provincial budget, but Senagama is unsure of the effectiveness of such a measure.
“The problem we have in Toronto and pretty much across Canada is that we don’t have the data on foreign investments, comprehensive data,” she explained.
Senagama said they have started collecting information on foreign investments for condos in the city but they’re lacking data for all housing types.
“We don’t know exactly what the level of foreign investment is, so therefore, without knowing that it’s difficult to forecast and say what the impact would be based on a tax,” she said.
On interest rates:
When asked about the potential impact of rising interest rates on Toronto’s housing market, Senagama acknowledged that, historically, the demand for homes tends to take a hit and prices will be affected. However, she said the current economic conditions suggest that interest rates won’t be increasing anytime soon.
“We are in an environment where we’re going to see low rates for a long time,” she said.
On the forecast:
For 2017, Senagama predicted that the Toronto-area will continue to see sustained growth in both home prices and sales. As for 2018, she suggested that the winds of change may be in the air.
“Where we will start to see things somewhat slow down is 2018 when a lot of the affordability concerns will have an impact on home-buying demand,” she said.
